I also would like to point out that Dr. Welsh, in addition to his other distinctions, is a well-known antitrust expert, having worked in Japan shortly after the war, and I think probably at other times.

So if it is agreeable with the committee and with the two witnesses, I would like to direct my questions to Dr. Welsh.

I would like to start off with just some generalized questions about the monopoly and antitrust aspects of the various plans, and go from that into some specific problems, and then, at the end, I would like to ask you if you could outline to us what you know about the compromise plan that has been suggested and how it fits into, or between, the administration plan and the Kerr plan.

Dr. Welsh, am I correct in that the President very much wants to have a single worldwide system?

Senator KEFAUVER. From time to time, we are going to be referring to the President's space message of July 24, 1961.

Is that the date?

Mr. WELSH. The policy statement is July 24; yes, sir.

Senator KEFAUVER. I think we might well print that as appendix 7 in the record.

(Exhibit 7 may be found on p. 271.)

Mr. WELSH. Your question was, Did the President anticipate and intend in his policy that this be really, in fact, a global system? Mr. FENSTERWALD. One single global system.

Mr. WELSH. Whether it is single or not does not seem to me to be the basic issue. There might be other systems, but he certainly intended that this all be worked in together and that there be cooperation between this country's activities and other countries' activities; that there be ground stations in other areas; that it be global in operation, all parts integrated.

Mr. FENSTERWALD. Maybe I should be more specific.

Did he envisage just one set of satellites, Dr. Welsh, which would be in orbit to make one global system?

Mr. WELSH. This is all that we have in mind at the present time. It is very possible that other satellites might be put up. We would hope that they would be compatible, technologywise, with the ones that were put up by the United States.

Mr. FENSTERWALD. Would he envisage more than one system put up by the United States or by U.S. corporations?

Mr. WELSH. We would expect only one commercial operation, here in the United States, although there might well be another system set up for defense purposes.

Mr. FENSTERWALD. But from a commercial standpoint, only one? Mr. WELSH. That is correct.

Mr. FENSTERWALD. So, by definition, then, that U.S. system, at least, would be a monopoly?

Mr. WELSH. That is correct.

Mr. FENSTERWALD. The basic question is whether that should be a private monopoly or whether it should be a Government monopoly, is that correct?

Mr. WELSH. That is certainly a basic question.

Mr. FENSTERWALD. And it is the administration's desire to create, by an act of Congress, a privately owned monopoly? Mr. WELSH. And fully regulated, yes.

Mr. FENSTERWALD. Yes.

Do you know if there are any historic precedents for the creation by the Government of a private monopoly with only one firm in the field?

Mr. WELSH. I have not researched that very carefully. I do not know of any.

I also do not know of any communications satellite system that has been put up, either.

Mr. FENSTERWALD. I have not researched it widely, but I have asked a number of people, and, although I have posed the question, no one has come up with a single monopoly which has been created by the Federal Government-a single private monopoly.

The communications satellite system is often dealt with in terms. of free enterprise versus Government ownership and control. Would you say that a private monopoly would strengthen the free enterprise system?

Mr. WELSH. I think that that correct, yes.

Mr. FENSTERWALD. Although our free enterprise system is based on competition, rather than on monopoly?

Mr. WELSH. Yes.

Perhaps I should have added to my statement it depends on what the nature of the private monopoly is, whether it does, in fact, strengthen or weaken.

In my statement, I indicated that if you did really develop an excessive concentration of power without adequate regulation, I think it would hurt the private enterprise system.

If, on the other hand, you do provide an opportunity for widebased investment and make certain that you have equitable access to the system and a competitive purchase of the equipment and all the other provisions we have in here, I think that it could do a lot to improve the competitive nature of the existing communications picture.

Mr. FENSTERWALD. I am still a bit puzzled how a monopoly increases competition. It may not have any effect on competition one way or the other-that is possible-but I do not see how it could possibly increase competition.

Mr. WELSH. It could.

If you have a considerable concentration of economic power or, in fact, a partial monopoly in an industry, and you set up a balancing monopoly that serves all of the people in that industry and gives everyone, including this concentration of power, no better than an even break, you can get much greater competition. This is what this intends to do.

Mr. FENSTERWALD. In other words, if we could translate this into the present context, the one near-monopoly in this field would be A.T. & T. at the moment?

Mr. WELSH. I do not think it is any secret, sir.

Senator KEFAUVER. "Any secret." You mean that is a fact?

Mr. WELSH. Yes.

I think that is, by far and away, the largest operation in the communications field.

Mr. FENSTERWALD. They have roughly 85 percent of domestic telephone business; they have 100 percent of oversea voice communica

82357-62-pt. 1- -3

tion; and they have assets of roughly $25 billion. So I think that is probably clear.

Would you say that the Kerr plan would increase competition? Mr. WELSH. You are referring to the bill?

Mr. FENSTERWALD. S. 2650.

Mr. WELSH. S. 2650.

I think that there was a risk involved in that particular bill, that it would increase the strength of an individual company among the carriers, and it might not have improved competition.

Mr. FENSTERWALD. You say it might not?

Senator DIRKSEN. Let me ask at this point: Does your answer apply to the compromise bill that was worked out?

Mr. WELSH. The answer does not apply to that, sir.

Mr. FENSTERWALD. Would you think that a monopoly owned and controlled by the Government, which would lease facilities to the private companies, would increase competition?

Mr. WELSH. I think it would have a chance to do so, yes, sir.

Mr. FENSTERWALD. Would it have more or less of a chance than the administration bill or the Kerr bill?

Mr. WELSH. I wish I could measure things that well. It depends, really, on how well the regulatory agencies of the Government operate if we have a private system.

If they really do operate effectively, I do not see that there would need to be any great difference between the effect on competition.

Mr. FENSTERWALD. They would have to be 100 percent effective? Mr. WELSH. And to make the analogy complete, 100 percent effectiveness on the part of the Government agency set up, which is not always the net result, either.

Mr. FENSTERWALD. Assuming, for the moment, that the creation of a private monopoly is unique, since we cannot find any counterpart to it, one reason for this rather unusual proposal, it has been said, is that we should avoid unnecessary delays.

Could you tell us what delays are taking place today under the present organizational situation?

Mr. WELSH. We do not have any organization at the present time for an operating commercial system, so that the absence of any organization at all or the plans and knowledge of what the organization is to be could have a delaying effect.

Right now I think there is not any delay because we are going ahead with the experiments as scheduled, and they would continue whether we had this operating organization plan firmed up and the law passed or whether we did not.

Mr. FENSTERWALD. Will the experiments continue at full tilt, whether a bill is passed this year or not?

Mr. WELSH. I would certainly hope that they would continue, because I know we do not wish in any way to inhibit the leadership effort of this country.

But I do say to you that the sooner it is known to all concerned as to just what the nature of the organization is going to be, the better prepared we will be to move that organization into the steps that have been developed through the experiments.

Mr. FENSTERWALD. But a great deal of experimentation and development has to take place before we will have a practical, operating system?

Mr. WELSH. And some time would have to elapse, even if a law were passed today, before an operating system could be set up, yes. Senator KEFAUVER. From what I have read in previous hearings, Dr. Welsh said we were going full steam ahead, and there was no delay in research and development.

Mr. WELSH. This is certainly correct at the present time, yes, sir. Mr. KATZENBACH. Senator, could I add a word?

It would be my judgment that failure to pass legislation at this session of Congress could very easily result in a delay in the establishment of this system.

I say this for the reason that you would leave the question in doubt as to whether the system would be Government owned, as you propose; whether it would be turned over entirely to the carriers, as other people have supported; or whether there would be a broad public corporation with broad participation from people.

It seems to me that, insofar as this research is being carried on under Government contract and independently today, that, not knowing what the role of the communications carriers was going to be within this system, not having worked this out, not allowing the time we now have to organize a corporation and organize the system could very easily result in a delay in the establishment of a commercial communications satellite system.

Senator KEFAUVER. I understand from the testimony that you are going full steam ahead, the Signal Corps and the Defense Department with the Advent system, the higher orbit communications system, is that not true?

Mr. KATZENBACH. That is correct, sir, but that is consistent with my statement that the failure to pass this legislation could result in a delay in the establishment of this commercial system.

Mr. FENSTERWALD. Several witnesses have pointed out that roughly 90 percent of what has to be done relates to rocket power.

This is either going to be done by the Government or under Government contract for the space program in general.

The delays, as I understand it, if there would be any, would have to do with the technology of communications.

Mr. WELSH. Are you referring to delays in getting a commercial, operating system going?

Mr. FENSTERWALD. Yes, sir.

Mr. WELSH. There are two forms of delays that can develop. Right now we are not experiencing either. We are going ahead with the experiments.

Also, we are laying plans to have something to carry out a system when it gets underway, the experiments having been conducted. So at this moment there is not any delay due to the fact that you have not passed any bill.

But, as Mr. Katzenbach says, the element of doubt as to just what form it would be and who is going to do what always creates uncertainty and does create some source of delay.

Mr. FENSTERWALD. What is peculiar about this particular time that the lack of a formal organization for the future should cause delays in research and development?

Mr. WELSH. I did not suggest it would cause delays in research and development. I said delays in the development of an operating system.

There is a difference.

Mr. FENSTERWALD. Just for a moment, then, let me ask one other question.

Do you anticipate any delays in the military system?

Mr. WELSH. As a result of?

Mr. FENSTERWALD. As a result of anything.

Mr. WELSH. Well, we always run into uncertainties in technological developments. We are hoping there will be no delays.

Senator KEFAUVER. As a result of legislation or no legislation, it does not affect Advent?

Mr. WELSH. That is right, Mr. Chairman.

Senator KEFAUVER. Are not the two systems very comparable?

Mr. WELSH. They are not systems yet, sir. They are experiments. There has been no system developed yet. We have four different experiments underway at the present time. Two of them are highorbiting, synchronous types, and two of them are lower orbiting types. None of them have been tested out yet, so we cannot refer to any one of them as a system. We can refer to them as projects.

Mr. FENSTERWALD. Everything, then, at the moment is experimental?

Mr. WELSH. This is correct.

Mr. FENSTERWALD. I do not see the urgency, then, in setting up a corporation where the research, development and experimentation, at least 90 percent, maybe 95 percent, either will be done by the Government or under Government contract.

Mr. WELSH. Do you want a comment?

Mr. FENSTERWALD. Yes, sir.

Mr. WELSH. There was less urgency in setting this up last year than there is this year. The sooner it does get clear and firm as to what the form of the organization is going to be, I think the faster we will move ahead.

Mr. FENSTERWALD. Your answer was that you could not foresee any delay in the military system at this time?

Mr. WELSH. That is right, or in the experimentation that has already been scheduled.

Mr. KATZENBACH. May I add a word, counsel?

There is no question in my mind that the military system is going to be run by the Government. Therefore, the issue which I have stated would cause delay here is not present in the Advent system.

Now, if the proposal is that you are going to decide whether the Advent system is going to be run by communications carriers, run by the general public or run by the Government, if that were left in doubt with respect to that system, then it seems to me that that doubt also could be present.

But if you ask the reasons for a delay, why this would result in delay, to me they are quite obvious, and that is that there would be in terms of the negotiations, which have to go on, with respect to foreign participants in this system, it is very difficult to conduct those negotiations if you do not know who is going to be running the system from this country.

This is not the difficulty-this is not a difficulty if you know that the Government is going to be operating that system.